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House DFL would add tax surcharge on rich

ST. PAUL -- Minnesota schools would be the biggest beneficiaries of a state House Democratic budget proposal that goes beyond the governor’s plan to increase taxes on the rich.

Minnesota House Speaker Paul Thissen, DFL-Minneapolis, unveiled a budget outline Tuesday that accepts Democratic Gov. Mark Dayton’s plan to boost taxes on the richest 2 percent of Minnesotans, and he went further by suggesting a temporary surcharge, probably on those earning more than $500,000.

DFL leaders said the surcharge would bring in $854 million needed to repay schools money the state borrowed from them over recent years. Thissen said the surcharge would disappear in two years.

House Republican Leader Kurt Daudt, R-Crown, said he was reminded of an old saying: “There is nothing so permanent as a temporary tax.”

The budget outline House Democrats released Tuesday is similar to a budget plan Dayton unveiled last week. Senate Democrats plan to release their plan today.

Democrats control the House, Senate and governor’s office for the first time in more than 20 years.

The House plan calls for a $37.8 billion, two-year budget.

Education Finance Chairman Paul Marquart, DFL-Dilworth, said that $700 million added to all levels of education is vital to improving the state’s economy. He said funds would especially help all-day kindergarten and other early childhood programs.

“When you invest early, you raise the graduation rate,” he said.

The House plan calls for enough money that every school district could institute all-day kindergarten. Dayton proposes some funds, but not enough to allow every school to be involved.

The DFL plan would boost public school funding by $550 million to $15.7 billion in the next two years. Higher education programs would get $150 million more, $11.2 billion total.

Most suggestions in the plan call for modest budget increases, but Democrats would cut $150 million from the $11.4 billion human services budget.

The biggest controversy likely will be around the proposal to increase taxes on the richest Minnesotans.

“Just as the state’s economy is beginning to recover, the House leadership is proposing increasing taxes to astonishing new levels, up to a rate of 11 percent on the state’s top wage-earners,” Senior Vice President Laura Bordelon of the Minnesota Chamber of Commerce said. “Roughly 20,000 small- and mid-sized businesses in Minnesota that pay their taxes through the personal income tax will be subject to these significant increases. We question how this proposal will improve economic competitiveness and job creation in Minnesota.”

Thissen, however, said Minnesota’s rich need to pay “their fair share.” Had they done that over the years, he said, schools would not be short of money.

He said Dayton’s proposal to raise taxes on couples with a $250,000 annual income and individuals earning $150,000 “is not enough” to raise enough money for what Democrats want to spend.

Thissen could not say exactly which taxes would increase, but said he expects elimination of what some see as loopholes corporations use to avoid taxes.

The speaker said that he would not expect a major sales tax increase like Dayton originally proposed, but he left open the possibility of some sales tax hikes.

The return of a homestead tax credit, which lowers most homeowners’ property taxes, is one of the Democrats’ priorities.

Tax increases would hurt Minnesotans, Republicans said.

“They would definitely show up in the budgets of average Minnesotans,” said Rep. Mary Liz Holberg, R-Lakeville.

Daudt said that more money for education could come from cutting other budgets. “What we showed the last couple of years is you can do things without tax increases.”

Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.